Frequently Asked Property Investment Questions
Whether you are a seasoned investor or a first time overseas buyer, there are always questions to ask. Here are some which get asked regularly. These answers are not intended to cover every angle of property investing and buying, just to give you a feel for things. We do, after all, guide clients through the buying process.
Q: What does a property agent do? I could do this all myself, so why use a property agent?
A: There is always the belief that buying property without a real estate agent will save you money. In reality you're almost always better off working with a professional.
Buying or selling a property is not something most of us do every day, in fact possibly not for a several years. Yet many think it is easy, because it is visible, tangible and most people have bought a home at some stage. And yes technology has shaken up the market, making more information available to more buyers. But let’s consider, not all the information is of equal value, nor even accurate. The danger with believing everything you read on the internet is that it can cost you money, if you act on out-dated information or even misleading advice.
And let’s not forget certain skills are needed that unfortunately not everyone has. Negotiating the property price for one, or even knowing whether it is a fair price. Then there is the question of familiarity with the buying process, getting the timings right, mastering the detail of the terms and conditions of the contract, knowing how to sort out the finance, setting things up to rent out and so on, as well as dealing with issues that arise during the buying process or snagging phase, to name a few, or what lawyers or rental agents are good to work with in-country.
You don’t usually get extra discounts, or a different price, buying new property directly from a developer, without an agent. And if you want to buy a resale home, then agents are key matchmakers between buyers and sellers in this market. In some instances agents charge buyer commissions, for example in Poland, where seller commissions are very small. But that is the nature of the property market there.
A good agent can help with all these things.
Q: What is Due Diligence?
A: In layman’s terms it is checking things out. If you don’t check out the property you are buying, then there is a danger the transaction could go very wrong. Due diligence is best done at different levels. First at a country level, then location within that country, the property itself, the vendor and the contract set up, in broad terms.
Which country or location best suits your needs, risk profile, capital growth and income level ambitions? What’s the level of infrastructure and economic growth?
With regard to the property, you may want to check out the neighbourhood, how easy it is to get to, or how attractive would it be to let out?
Is the vendor selling an unencumbered (without debt) property? Are the relevant licences granted, do they offer long-term building guarantees? Is it most tax efficient buying as an individual or via a company?
A good agent can help with much of this, but there are limitations. A lot of legal checks are best done right at the point of purchase, so that they are fresh and current.
Q: How does the overseas property buying process differ?
A: Many of the countries in mainland Europe, operate a Notarised buying process, a significant difference between the UK purchasing process and many countries in Europe. This means the transaction is concluded and formally registered in front of a Notary (a specially licensed lawyer). In the UK contract exchange and completion can occur without the buyer having to be present.
Buying costs can differ widely too. Whilst stamp duty (Stamp Duty Land Tax, SDLT) tends to be higher in the UK, the overall conveyancing costs are cheaper, generally speaking. So in the UK, property buying costs may represent up to 7% of the value of the property bought, (including 3% stamp duty) this could be between 5-11% abroad.
Q: What about financing a property investment abroad?
A: it is always advisable to address this early on in the investing process, particularly if seeking local funding. Mortgages can take longer to secure abroad and the process may differ. If this is done early on, then at least there may be a fall-back option for securing finance in your domestic market, but if it is left too late, this option isn’t available.
Q: What’s the difference between a Holiday Let and a Buy-to-let?
A: Buy-to-let is by nature an investment property let out on a longer term basis, measured in months, not days or weeks. Holiday lets tend to be weeks or days, in length. The nature of each is different in terms of the operating models and the income: cost model.
They can also be covered by different pieces of legislation and sometimes be subject to different tax regimes.
Q: Under what circumstances can Property be a serious consideration as part of a 'Pension'?
A: Increasingly investors are seeking property as a vehicle to supplement pension plans. They are usually fed up with their pension and the returns it is delivering. Are you one of these people, seeing inflation eat away at investments, or where the underlying performance just isn’t going as expected?
Or you may want to achieve a balanced investment portfolio and spread the returns and risk across a number of investment vehicles?
So why is property a decent alternative choice?
In property you get income, which taken as a proportion of the sum paid for the property, equates to yield.
In addition there is the capital growth.
Plus there is the leverage, the ability to borrow money against the property asset. This means several things. Not all of your money is tied up in one property, which means it can be invested in more properties, or other investments, thereby spreading risk. And you get the returns on the value of the property, not just the sum you have invested.
There are other ways of saving for retirement which can deliver higher returns. The advent of Self Invested Personal Pensions (SIPPs) has opened up a whole raft of different investment choices. SIPPs are designed for people who want to manage their own fund by dealing with, and switching, their investments when they choose. For property to be an acceptable form of investment via a SIPP, it has to be commercial property, including hotel room investments (as long as they meet the relevant Tax Authority criteria).
It is worth noting that property, as a complementary part of pension planning, is not for everyone and that appropriate advice should be sought, as well as considering a number of factors like your personal financial situation and your risk profile.
Property Venture® is an award-winning, UK-based agency for overseas property who helps people buy investment property and holiday homes in Europe, more easily and safely than they can on their own, because we offer grounded common-sense advice.
The focus is mainly greater Europe: Poland property, UK investments, Spain property, Turkey property, Cyprus property
On the Advisory Board and a Member of the Association of International Property Professionals (AIPP) the business has been vetted, approved and voluntarily commits to Industry Regulation and the Professional Code of Conduct. We are known for our quality customer service and non-pressurised approach to sales. Take a look at what our clients say
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